There’s an intellectual parlor trick that dominates the Bitcoin debate. Critics ask: can you buy coffee with it? Supporters respond with Lightning Network demos and transaction-per-second roadmaps. Both sides are having the wrong conversation entirely.
The coffee question assumes that the most important property of money is its function as a medium of exchange. This assumption is so deeply embedded in mainstream economics that most people never think to question it. But if you trace the history of exchange media, something curious emerges: medium of exchange has never been the hard problem. Grain served as a medium of exchange for millennia. Cowrie shells worked. Glass beads worked. We used Bitcoin as a medium of exchange when it was worth a fraction of a penny and swinging 30% in a single day. Today we use government-issued fiat currencies, instruments that lose purchasing power by design, as our primary media of exchange, and commerce hums along fine.
If you can mediate exchange with nearly anything, then medium of exchange is not where the value lies. The valuable function of money, the one that’s been almost impossible to get right, is the unit of account.
To understand why unit of account matters so profoundly, you have to step back and ask a more fundamental question: why do humans trade at all?
The answer is simple but carries enormous implications. We trade because voluntary exchange is positive-sum. When I trade you my surplus wheat for your surplus lumber, we’re both better off than we were before the transaction. Scale this principle across billions of people making millions of daily decisions and you get the emergent phenomenon we call “the economy,” a kind of distributed superorganism, self-organizing through the price signals that ripple across markets like neural impulses through a planetary nervous system.
Friedrich Hayek saw this clearly. His insight about the price system, laid out in his 1945 essay “The Use of Knowledge in Society,” was that prices encode information no central planner could ever aggregate. The price of steel in Shanghai, the wage rate for welders in Houston, the cost of shipping through the Suez: these aren’t just numbers. They’re compressed signals that allow billions of autonomous actors to coordinate without any of them needing to understand the whole. This is what money does at the systemic level. It’s not primarily a thing you carry in your wallet. It’s the signaling infrastructure of human cooperation itself.
Ludwig von Mises built his entire theory of economic calculation on this foundation. Without a reliable unit of account, rational economic planning becomes impossible. Not merely difficult, but impossible. This was his devastating critique of socialism: not that central planners are stupid or corrupt (though they may be both), but that without market prices denominated in sound money, they are blind. They cannot calculate. They cannot allocate. They’re flying an impossibly complex aircraft with no instruments.
So the unit of account isn’t some abstract technicality. It’s the substrate on which all economic coordination depends. And here is where the history of money becomes a history of tragedy.
Every money humanity has ever used has been trust-based. Yes, including gold.
Gold has excellent properties. It’s scarce, durable, divisible, fungible. The Austrian economists, from Carl Menger through Mises and Murray Rothbard, correctly identified these properties as the reason gold emerged as money through market processes rather than government decree. But gold has a fatal flaw that no amount of chemical inertness can fix: it’s physical. And because it’s physical, it must be centralized to function as a unit of account at scale. You can’t run a global economy by physically weighing gold dust for every transaction. You need vaults. You need banks. You need claims on gold rather than gold itself. And the moment you introduce that layer of abstraction, you’ve introduced a trusted third party.
Nick Szabo, the cryptographer and legal scholar whose work on digital contracts and “Bit Gold” presaged Bitcoin by over a decade, articulated the problem with a precision that should be carved above the door of every central bank on Earth: trusted third parties are security holes.
Not “potential” security holes. Not security holes “if the wrong people are in charge.” Security holes by their nature. The argument isn’t that the people running the system are untrustworthy. The argument is that the architecture is unsound. A system that requires trust will be exploited, because the incentive to exploit it is overwhelming and the capability to do so is built into the design.
Think about what control of the monetary unit actually means. If you can manipulate the tally board, the unit in which all economic value is denominated, you can silently redirect wealth from every productive actor in the economy to yourself. You don’t need to outproduce anyone. You don’t need to innovate. You don’t need to offer anything of value in exchange. You simply adjust the numbers. This is the Cantillon Effect in its most general form: those closest to the point of money creation benefit at the expense of those furthest away. Richard Cantillon identified this in the 18th century. It has been operative in every monetary system since.
And once the corruption starts, it accelerates. Whoever gains control of the monetary unit gains wealth. Wealth is power. Not “wealth and power” as separate things, but the power of wealth, meaning direct command over resources. That power can be used to entrench the corruption further. You’re now rewarding the corruptors and punishing the producers. The feedback loop is vicious: corrupt the signal, gain wealth, use wealth to deepen the corruption, repeat.
Hans-Hermann Hoppe’s analysis of time preference and the state becomes relevant here. When the monetary unit is subject to debasement, the entire economy shifts toward higher time preference, tilting away from long-term saving and capital formation and toward short-term consumption. This isn’t a minor distortion. It reshapes the structure of production, erodes the capital stock, and makes everyone poorer over time. The corruptors don’t merely skim from the top; they degrade the entire system’s capacity to generate prosperity.
And here’s the bitter irony: those who benefit from monetary corruption will never voluntarily fix it. Why would they? The broken tally board is the source of their power. Asking them to adopt sound money is like asking a parasite to evolve itself out of existence. Rothbard spent a career documenting how the state and its allied banking interests systematically destroyed sound money not by accident, but by design, because an elastic money supply is the most potent instrument of wealth transfer ever devised.
On January 3rd, 2009, something unprecedented happened. A pseudonymous programmer, building on decades of work by cryptographers including Szabo, Hal Finney, Adam Back, Wei Dai, and others, launched a system that solved the trusted third party problem for money.
Not partially. Not “pretty well.” Completely.
Bitcoin is a trustless, fixed unit of account. There will only ever be 21 million. No board of governors can vote to change this. No executive order can amend it. No army can march on the protocol and force it to comply. The supply schedule was set in the genesis block and is enforced by a globally distributed network of nodes that answer to no jurisdiction, no institution, no individual. For the first time in human history, we have a tally board that cannot be rigged.
The implications of this are difficult to overstate, partly because we’re so accustomed to thinking about money in terms of what it does for us individually (buying things, saving for retirement) that we miss what it does for the system. A fixed, trustless unit of account doesn’t merely protect your savings from debasement, though it does that. It restores integrity to the entire signaling infrastructure of human cooperation. Prices denominated in an incorruptible unit carry true information. Economic calculation becomes dramatically more efficient. Capital flows toward its most productive use rather than toward whoever is best positioned to exploit monetary distortion. The positive-sum game that is voluntary exchange gets to operate without a corrupted referee.
This is why the throughput objection is so deeply misguided. Seven transactions per second sounds absurd if you think Bitcoin needs to replace Visa. But Bitcoin doesn’t need to replace Visa. The unit of account doesn’t need to be the medium of exchange for every sandwich purchase. It needs to be the reference point, the denominator in which all other values are expressed, the anchor that keeps the entire price system honest. For that function, seven transactions per second is more than adequate. Settlement of the most significant transactions, the ones that actually structure the economy, is all that’s required on the base layer. Everything else can be built on top.
This brings us to Michael Saylor, who gets more ridicule than he deserves from people who haven’t followed the argument to its conclusion.
The surface-level read on Saylor is that he’s making a leveraged bet on number-go-up. The deeper read is that he’s accumulating a position in what amounts to future energy-economic infrastructure.
Here’s the chain of reasoning. Bitcoin mining is the conversion of energy into monetary units. Miners are economically incentivized to seek the cheapest available electricity. This creates a natural gravitational pull toward energy-rich locations, places with abundant generation capacity, particularly from sources with high upfront capital costs but near-zero marginal costs like nuclear (including the coming wave of small modular reactors), hydroelectric, geothermal, and stranded natural gas.
Now consider what happens as mining scales in these locations. The mining operations become anchor tenants for power generation, providing guaranteed, flexible, interruptible baseload demand that makes it economically viable to build generation capacity that wouldn’t otherwise pencil out. This in turn attracts other energy-intensive industries: data centers, manufacturing, computing infrastructure. You get the formation of new industrial clusters, the next generation of economic hubs, co-located with abundant, cheap power.
Here’s where it gets interesting from a monetary theory perspective. Bitcoin mining effectively solves the Cantillon Effect at the energy layer. In the current system, newly created money enters the economy through the financial sector: through banks, through sovereign debt markets, through the institutions closest to central bank operations. The benefits of money creation flow to financial intermediaries first and reach the productive economy last, if at all.
In a Bitcoin-denominated system, new monetary units are created at power plants. The beneficiaries of money creation are the entities converting real-world energy into economic security. The Cantillon gradient doesn’t flow from Wall Street outward; it flows from the point of energy production outward. And because the industry that uses energy is naturally co-located with the industry that produces it (and that now also produces money), you dissolve the structural imbalance that the Cantillon Effect creates. The Triffin Dilemma, that persistent tension between domestic and international monetary obligations that has plagued every reserve currency, ceases to apply when the monetary base is generated not by a single sovereign issuer but by a globally distributed network of energy producers.
Saylor, by accumulating Bitcoin at scale, is effectively buying a claim on this emerging energy-economic topology. Whether he personally lives to see the full realization of this thesis is an open question. These are multi-decade structural shifts. But the directionality of the trade is sound.
There’s a framing of Bitcoin that makes it sound like a weapon, a tool for “destroying” central banks or “overthrowing” the state. This framing is both needlessly inflammatory and conceptually wrong. It misunderstands the nature of the shift.
The power of monetary corruption lies entirely in control of the tally board. If the tally board can’t be corrupted, the power evaporates. You don’t need to storm the Bastille. You don’t need to win an election. You don’t need to convince the people currently benefiting from the broken system that they should fix it, because they never will. To them it isn’t broken. You simply need a better tally board, and you need productive people to start using it.
This is what adoption is. Every entity that denominates in Bitcoin, that holds it, that prices in it, that settles in it, strengthens the signal and weakens the noise. The network becomes more useful as it becomes more capitalized. More capitalization means a more stable and reliable unit of account. A more reliable unit of account means more efficient economic calculation. More efficient economic calculation means more prosperity for everyone participating in the positive-sum game of voluntary exchange.
This is a self-reinforcing dynamic. The economy, understood as the emergent behavior of all positive-sum actors, effectively pays people to adopt a more efficient signaling medium. This is why Bitcoin’s value has grown relentlessly over its lifetime despite every conceivable headwind: bans, crackdowns, exchange collapses, protocol disputes, media hysteria. The underlying driver isn’t speculation. It’s the economy itself recognizing a superior coordinating instrument and migrating toward it, the same way it has always migrated toward better technologies like the printing press, the telegraph, container shipping, and the internet.
Bitcoin at its current capitalization is, in a meaningful sense, still a prototype. Its unit-of-account function is latent, not yet realized, because the network isn’t large enough to serve as a stable global denominator. But the architecture is proven. The genie is out of the bottle. Before 2009, a trustless fixed unit of account was a theoretical impossibility, something Austrian economists could describe the need for but couldn’t build. Now it exists. The question is no longer if but when.
Hal Finney understood this from the beginning. His first response to Satoshi Nakamoto’s whitepaper wasn’t about payments or privacy or sticking it to banks. It was about the total potential value of the network if it became the dominant global monetary system. He ran the numbers on the unit-of-account endgame before anyone else had the conceptual framework to understand what he was calculating.
If you’re not holding Bitcoin, you’re short Bitcoin. Not in the trading sense. In the existential sense. You’re betting that the most resilient, most redundant, most thermodynamically grounded informational system humans have ever constructed, a system that could survive a nuclear war and keep ticking, will somehow fail to do the thing it was designed to do, in a world that desperately needs it to succeed.
That’s a brave bet. It’s also, in the long run, a losing one.
Cantillon, Richard. Essai sur la Nature du Commerce en Général. 1755. Translated by Henry Higgs, Macmillan, 1931.
Finney, Hal. “Bitcoin and Me.” BitcoinTalk Forum, 19 March 2013. https://bitcointalk.org/index.php?topic=155054.0
Finney, Hal. “Re: Bitcoin v0.1 released.” Bitcoin Mailing List, 11 January 2009. Archived at Satoshi Nakamoto Institute.
Hayek, Friedrich A. “The Use of Knowledge in Society.” The American Economic Review, vol. 35, no. 4, September 1945, pp. 519–530.
Hoppe, Hans-Hermann. Democracy: The God That Failed: The Economics and Politics of Monarchy, Democracy, and Natural Order. Transaction Publishers, 2001.
Menger, Carl. Principles of Economics (Grundsätze der Volkswirtschaftslehre). 1871. Translated by James Dingwall and Bert F. Hoselitz, Free Press, 1950. Reprinted by Ludwig von Mises Institute, 2007.
Mises, Ludwig von. Human Action: A Treatise on Economics. Yale University Press, 1949.
Mises, Ludwig von. “Economic Calculation in the Socialist Commonwealth.” 1920. Translated by S. Adler. In Collectivist Economic Planning, edited by F.A. Hayek, Routledge, 1935. Reprinted by Ludwig von Mises Institute, 1990.
Nakamoto, Satoshi. “Bitcoin: A Peer-to-Peer Electronic Cash System.” 2008. https://bitcoin.org/bitcoin.pdf
Rothbard, Murray N. What Has Government Done to Our Money? Pine Tree Press, 1963.
Rothbard, Murray N. The Mystery of Banking. Richardson & Snyder, 1983.
Szabo, Nick. “Trusted Third Parties Are Security Holes.” 2001. https://nakamotoinstitute.org/library/trusted-third-parties/
Triffin, Robert. Gold and the Dollar Crisis: The Future of Convertibility. Yale University Press, 1960.
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